Is dropshipping on ebay worth it?
Today, I’m going to share with you an eBay Dropshipping Horror Story that happened to someone I actually know: my cousin.
My goal in telling you this is to highlight how it’s a horrible business model for beginners. I want to use this story to keep you from making the same mistakes he did.
So gather around my virtual campfire here, and I’ll tell you what happened.
Don’t have the time to read a whole article? Click the video below to watch me tell the story.
I guess in some ways, you could say entrepreneurship runs in my family. Like me and my brother, my cousin was interested in running his own online business.
My cousin found this course about the eBay dropshipping business model on Unity, and decided to give it a try. It essentially teaches you to list products from other vendors, like Wal-Mart.
You put the items from other vendors on eBay and mark them up a bit. The goal is to make as many listings as possible with key words to drive up your profit.
Honestly, it worked pretty well for him in the beginning. He made his first 100 listings and he was turning a bit of a profit.
But then, like in any other successful business, he decided to start scaling it up. He began adding more and more listings. eBay has a limit to how many listings you can make on an account, so my cousin even started making more accounts.
The issue was that, as he scaled up his business, he also scaled up its flaws…
The Achilles Heel of eBay Dropshipping
What were the flaws in my cousin’s growing business?
Well, his buyers would often go to the vendor he was listing from, like Wal-Mart, and see that the item was out of stock. They’d find my cousin’s listing on eBay and order that instead.
Lo and behold, his items would be out of stock, too. Because he was just marking up and listing items from another vendor, he’d have to message these customers saying that the item really was out of stock.
Naturally, most people wanted to cancel their orders with him. Some even got upset.
That’s pretty understandable – they were paying a marked up price to get an item that was supposedly available on eBay. What was the point of paying a higher price when they could just wait for it come back into stock cheaper at Wal-Mart?
The problem is, eBay doesn’t like dropshipping so much. That’s because they’ll send the customer a notification that their item is going to ship in a couple days once they order. If it’s out of stock, it obviously can’t be shipped out, making these notifications false.
On eBay, you’re supposed to have the item in your inventory. You’re supposed to be able to look at it and confirm it’s there, or take down the listing if it’s no longer available.
My cousin got around this by marking these out of stock orders as “customer wants to cancel.” That kept eBay from coming down on his accounts.
But at the time this story occurred, he was actually on vacation, and he had a virtual assistant who was handling all this for him. That’s where the “horror” part of this story comes in…
The Horror Part of the Story
So my cousin was enjoying a vacation, and he’d left his business in charge of a VA.
Unfortunately, this VA hadn’t been trained correctly. They were marking all the canceled orders as “items out of stock,” which was the truth.
Well, as you can imagine, eBay noticed this right away. They came down on all his accounts like a hammer.
They held all his accounts and PayPal. On top of that, they even wanted to charge him a bunch of fees.
My cousin was left in debt, and for all that debt, he had nothing to show. He simply had to eat the costs.
PayPal had his money, and his customers weren’t getting their shipments. His business model was in shambles around his feet.
The Happily Ever After (and Moral of the Story)
Now, you’re probably thinking to yourself that none of this would have happened if it weren’t for the VA’s mistake. Maybe you’re telling yourself that you could make this business model work, as long as you mark out of stock orders as canceled.
However, I think this would have happened eventually no matter what. Aside from the VA’s mistake, his operating costs were high and there was little payoff.
Sure, he was getting a bit of cash back on his credit card, but at the end of the day, he wasn’t investing time, money, and effort into a real business that he could sell.
So what happened next?
Well, my cousin was left in debt. Luckily for him, that wasn’t the end of his story.
I told him to come work with us so he could learn more about our business model and how it works. Now, he’s taking home $5k-20k a month in profits just from his share.
Because of this, he was able to clear off the debt from eBay and PayPal.
What to Do Instead of eBay Dropshipping
I’m not telling you this story to say that I’m the best or that I’m a hero – nothing like that. But now that we’ve gotten to the end of my cousin’s story, I do want to tell you about my business model.
There are a few reasons why I think it’s far better than eBay dropshipping. The number one reason is that you have control of the asset. It’s your store.
The next reason is that you’re working directly with the supplier for the item you’re selling. That means that if it’s out of stock, it’s probably out of stock everywhere else, too, so you can secure the order in good conscience by placing it on a back order.
Another reason I love high-ticket dropshipping is that you start seeing a cash flow within a few weeks. Unlike eBay dropshipping, you’re not making tons of listings that only earn you paper-thin profits.
High-ticket items are expensive items, so even if your margin of profit is as low as 10%, you’re still making a lot of money on every single sale. You get the cash from each sale up-front and quickly, in as little as a few days with Stripe. We have more information on why high-ticket dropshipping is better than low-ticket dropshipping here.
Here’s my favorite part about high-ticket dropshipping: you’re making a business that you can actually sell in the end. You can think of each dropshipping store as a piece of virtual real estate that you’re investing in.
Just like with real estate, there are buyers who will pounce on the opportunity to buy it.
There are two business models that I really hate: eBay dropshipping and dropshipping from Aliexpress with Facebook ads. I just don’t think they work well at all, and if you’re a beginner, you should stay away from them.
When it comes to online assets, your objective should be to make a website that you can sell and cash out on. You can try checking out Empire Flippers and seeing what’s for sale, as well as looking at the business models there.
Basically, I want you to take this story and to learn from it. Don’t make the same mistakes my cousin did.
In our Online Assets Playbook, we delve into how we use high-ticket dropshipping to generate fast cash flow and eventually even to sell the site. We funnel that cash flow into other sites we can sell.
We also now have a detailed Instant eCommerce Asset course you can sign up for to get more information on all our time-tested strategies.